Amalgamation surplus is not taxable revenue income where no realisation of profit occurs and assets are taken over at concessional value.

Surpluses recorded in an amalgamation account, where a transferee-company acquires assets and liabilities at values below the assets taken over, are not taxable as revenue receipts or revenue gains merely because they appear as a balancing figure. The article states that no income accrues simply from obtaining a going concern or assets at a concessional value, and that profit cannot be inferred without a realisation event. On the facts discussed, the surplus was treated as either a saving on acquisition or a remission of part of a debt, neither of which constituted taxable revenue income in these references.

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Issues: Whether the surplus arising on amalgamation of companies, reflected in the amalgamation account because the transferee-company took over assets and liabilities at values lower than the assets acquired, constituted taxable revenue receipts or taxable revenue gains.

Analysis: The majority held that an amalgamation of this kind did not by itself generate taxable income. The surplus was treated as a balancing figure arising from the manner in which the amalgamation was structured and from the issue of shares to the transferor-company's shareholders at a value below the underlying assets taken over. The decision emphasised that no income accrued merely because the assessee obtained assets or a going concern at a concessional value, and that profit could not be inferred in the absence of a realisation event. On the facts, the surplus was regarded either as a saving on acquisition or as a remission of part of a debt, neither of which constituted taxable revenue income in the circumstances of these references.

Conclusion: The surplus arising on the amalgamations was not taxable as revenue receipt or revenue gain, and the answer was in favour of the assessee.

Final Conclusion: The references were answered by holding that the impugned surpluses from the amalgamation arrangements did not form part of taxable income under the revenue head.

Ratio Decidendi: A surplus arising only because assets and liabilities are taken over in amalgamation at a concessional or non-par basis, without a separate realisation of profit, is not taxable as revenue income merely because it appears in the amalgamation account.

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